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Honda Motor Co. has discovered what could be a breakthrough in electric motors, freeing automakers from the high cost and supply limitations of rare-earth metals.

This fall, Honda will roll out a hybrid variant of its Freed, a subcompact Japan-market minivan based on Honda Fit architecture. A new electric motor, developed with Japanese metal supplier Daido Steel Co., provides the needed high-performance hybrid vehicle magnet that doesn’t require heavy rare earths.

The Freed’s electric motor uses a hot deformation method to create the magnets, instead of the traditional sintering method. The new method allows the magnet’s microscopic crystals to align in a much finer structure with great heat resistance, which bypasses the need for the heavy rare-earth metals.

“A reduction in the use of heavy rare earth elements has been one of the major challenges needing to be addressed,” the companies said in a joint release.

Plug-in electric vehicle motors operate at higher temperatures because they are the sole traction source powering the wheels. Hybrid motors typically work in tandem with the engine. The higher temperatures mean that PEV and hybrid electric motors still rely on heavy rare-earth metals.

Automakers have been searching for alternative rare-earth metals, and the metal’s price is expected to rise along with growing demand from the automotive and electronics industries. Rare-earth metals are used heavily in electric motors and batteries for cars and electronic products.

China is the world’s key producer of rare-earth metals, accounting for as much as 90 percent of global output. That causes concerns about both price and supply, which was experienced by Japanese automakers during 2010. During a territorial dispute over a spray of islands claimed by China and Japan, Beijing put pressure on Japan by halting shipments of rare-earth metals. Japan backed down.

“Rising global demand for rare earth metals has resulted in sharp increases in their prices due to a flat to negative supply growth from the key producing region,” a Technavio Research report said. “Japan has been sourcing rare earths and is aggressively trying to develop its own source of rare earth metals amid regional disputes with China.”

Honda’s new technology is not completely free of rare-earth metals. High-power magnets used in electric or hybrid vehicle motors use another rare-earth called neodymium. But that is considered a light rare-earth metal and can be sourced from China as well as other countries, such as the U.S. and Australia.

Honda expects to deploy the new motors in other hybrid vehicles. Daido Electronics Co. will begin mass producing the new magnets in August at a newly built line in a factory in Japan.